Tuesday, May 21, 2024
Airfreight accelerates e-commerce boom

Airfreight accelerates e-commerce boom

The pandemic boosted e-commerce demand, and the permanent shift in retailing away from physical stores in several major countries has continued to contribute towards this growth. 

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While Far East Asia has been the primary source of the demand for e-commerce operations at present, there have been temporary surges over the last few years in countries, such as India and Turkey, looking to fill manufacturing gaps caused by a locked-down China.

“What we’ve seen in the background is a fundamental shift in the logistics chain – including, most fundamentally, a cranking up of the necessity of speed of delivery.  Air cargo has, therefore, stepped up significantly over the last three years in particular in terms of playing its part,” Bob Matharoo, Cargo First’s Head of Cargo, stated.

“We appear to be in a ‘settling’ period, where the focus is stabilising on the Far East. Stabilisation is the key word here: only the e-commerce sector is driving significant growth, and arguably, it will remain this way for the foreseeable future.

“However, in the medium to long term, it is fair to expect that other world regions such as South America will likely become increasingly important players.”

Bournemouth Airport is part of Regional & City Airports (RCA), a leading UK regional airport operator
Bournemouth Airport is part of Regional & City Airports (RCA), a leading UK regional airport operator / @Cargo First.

Changing practices

Cargo First and Bournemouth Airport have made no secret that they have focussed on the e-commerce market as a critical growth area.  That doesn’t mean that they’ve ignored other sectors. Producing and dispatching orders almost daily is becoming the standard modus operandi for many industries – perishables being another good example.

Big global names such as Amazon and Temu have been among the key drivers in the e-commerce space, although in the post-pandemic pivot to online shopping, almost every retail brand now interacts with airfreight.

“We see the absolute focus on speed of delivery being just as valuable and applicable to other types of freight as we develop,” Matharoo explained. “Being new, nimble and with a straightforward operational structure, we’ve kept processes efficient to ensure we deliver market-leading airport process times.”

Diversification in Asia

While the effects of the China + 1 approach cannot be ignored, in terms of elements of new demand starting to pop up from countries such as Vietnam and Thailand, the fact is that the e-commerce market is fundamentally driven by cost and scale.

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On both fronts, the Chinese market is difficult to beat: the dynamism by which the market can quickly generate new manufacturing facilities and mobilise vast workforces and the significant growth incentives available from Chinese regional governments.

Concerning China as an origin country for e-commerce goods, it’s vital to note the growth of Chinese logistics companies and even e-tailers in the West,” Matharoo said.

“This means those that have invested in this way have greater control of the whole chain and a long-term guarantee for the sustainability of the market they are creating.

“For these reasons and more, China will remain by far the biggest driver for e-commerce market growth for the considerable time being,” he added.

Route rates

There is a range of factors that can influence airfreight rates. The initial jump in e-commerce demand experienced in 2020-2022 coincided with the mass global movement of Covid-related medical goods – so the joint effect of those two elements collectively pushed up rates.

“What we’ve seen since is a combination of continued high demand for e-commerce goods movement and high aviation fuel prices offset by a surge of capacity supply into the airfreight market, hence something of a dampening of airfreight pricing,” Matharoo explained.

“The point is that whilst growth in e-commerce demand is a factor in air cargo rates, the sector is just one of several significant drivers at play.”

The continued high level of airfreight capacity supply compared to demand, even offset by high aviation fuel costs, will likely dampen any material rate increase.

“We expect to see continued robust growth in the e-commerce sector this year, with likely a more pronounced peak in Q4 driven by the increased market penetration of the e-tailers,” he added.

“Fundamentally, however, we’re keen to see how other sectors will progressively employ the technology and efficiency benefits already exploited by e-commerce.

“At Cargo First – Bournemouth Airport, we’re determined to lead the way in exploring these opportunities with prospective clients and demonstrate how we can collectively add value to logistics chains across an ever-widening range of sectors.”

Picture of James Graham

James Graham

James Graham is an award-winning transport media journalist with a long background in the commercial freight sector, including commercial aviation and the aviation supply chain. He was the initial Air Cargo Week journalist and retuned later for a stint as editor. He continues his association as editor of the monthly supplements. He has reported for the newspaper from global locations as well as the UK.

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